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Perhaps Mitt Romney should have focused more on the entitlement part of his comments to a GOP fundraiser in May, and less on the 47% who don't pay federal income tax.

According to a recent analysis by Martin Murenbeeld, chief economist of DundeeWealth, the debate should more properly center on what he calls "a crisis of entitlements" that is effectively rendering the U.S. federal government impotent when it comes to key parts of the economy such as infrastructure.

As the chart shows, such critical aspects of federal spending have taken a relatively small and constant share of federal spending since 1970, while entitlements—transfer payments for which no current services are performed, including Social Security, unemployment insurance, and food stamps (now the Supplemental Nutritional Assistance Program)—have ballooned to more than 60 cents of every budget dollar. Meanwhile, defense spending's share of the budget has been halved, to less than 20 cents on the dollar.

"The whole Western world has gotten itself deeply into debt, and this is one of the causes," says Murenbeeld. The U.S., he says, has moved toward the social democracy of Europe, or Canada, which spends 65% of every dollar on entitlements.

"What services should the federal government be performing, and should it be in the business of providing financial support to individuals on an ongoing basis?" Murenbeeld asks. It would be instructive to hear some answers at the debates.

Last Week: Review

The Big Bang

In one of the largest settlements of a securities-fraud class action,
Bank of AmericaBAC -0.2178649237472767%Bank of America Corp.U.S.: NYSEUSD22.9
-0.05-0.2178649237472767%
/Date(1481300694592-0600)/
Volume (Delayed 15m)
:
31766321
P/E Ratio
19.07811588161734Market Cap
232342244198.49
Dividend Yield
1.3109481651095516% Rev. per Employee
432244More quote details and news »BACinYour ValueYour ChangeShort position
said it will pay $2.43 billion to investors to settle a class-action lawsuit that alleged it misled investors about the financial health of Merrill Lynch at the time of their 2009 merger. Bank of America said in a statement that it "denies the allegations" and is making the settlement to avoid the "uncertainties, burden and expense" of more litigation. Charges from that settlement and other matters will total 28 cents a share in the third quarter, and probably result in a loss for the period.

Blowback

Central bankers from China and South Korea slammed the Fed's latest stimulus, and suggested Asia should develop a core regional currency to reduce its dependence on the U.S. dollar. The officials worried about rapid capital inflows into emerging markets which could cause a spike in global raw-material prices. Meanwhile, the yuan hit its highest level against the U.S. dollar since the start of the modern Chinese currency system in 1994, and the Chinese central bank injected a record $58 billion into its financial system to address a cash crunch that had driven up borrowing costs.

Gee, GDP

Second-quarter gross domestic product grew only 1.3%, as a drought hurt inventories. It fell from a previous estimate of 1.7%, slower than the first quarter's 2% pace. Durable-goods orders tumbled 13% in August from July, the biggest monthly drop in more than three years. U.S. business activity contracted in September, the first time in three years.

Unrest Rises

Anti-austerity protests turned violent in Greece and Spain, raising concerns about the euro zone's ability to contain its debt crisis. Spain's government unveiled measures to increase taxes and cut spending for 2013, and Greece's coalition reached a deal on a multibillion-euro austerity plan. Spain said its banks will need $69.23 billion in new capital.

Kind Quarter

The third quarter was kind to equity indexes, with the Dow Jones Industrial Average up 4.3% and the Standard & Poor's 500 up 5.8%.

Can't We All Get Along?

President Barack Obama, at the U.N., called for an end to violence and said he would do what it takes to prevent Iran from getting nuclear arms. Israel's prime minister said Iran would be on the brink of a nuclear weapon in less than a year.

Fixing Libor

Britain's Financial Service Authority issued a plan to fix Libor, one that will see the top financial regulator overseeing the benchmark.